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Friday, May 13, 2016

This cases arises out of a motorcycle accident that occurred in California. The rear tire of the motorcycle exploded, severely injuring the cyclist and killing his passenger. The cyclist sued the tire manufacturer, a Taiwanese company called Cheng Shin Rubber Industrial Co. Ltd. ("Cheng Shin"), in California state court. Cheng Shin in turn filed suit against Asahi Metal Industry Co. ("Asahi"), a Japanese manufacturer, which produced the tire valves for Cheng Shin's tires.

The cyclist later settled with all defendants, which left standing only the lawsuit between Cheng Shin and Asahi. Asahi claimed that the state court in California had no jurisdiction over it. True, Cheng Shin sold throughout the world, and 20 percent of its sales took place in California. However, the transaction between Cheng Shin and Asahi occurred in Taiwan, and the assembly of Asahi's units into Cheng Shin's tires occurred in Taiwan.

The Supreme Court, in an opinion by Justice Sandra Day O'Connor, found that Asahi did not have the necessary minimum contacts with the state of California for the state to have jurisdiction over it. Having its products reach the United States indirectly through the stream of commerce, it was held, was not a sufficient basis for contacts with the forum.

Takeaway:

Asahi Metal is one of the most important Supreme Court cases regarding personal jurisdiction, and it is no surprise that Asian parties are involved. One could say that the Supreme Court stemmed the tide of numerous lawsuits filed against Asian manufacturers.